Displaying items by tag: fees

Financial giants are snatching up direct indexing clients as fast as they possibly can, but they need to do more work to solidify their position with investors. Cerulli Associates is predicting direct/custom indexing will grow at a shocking 12% growth in the next five years which will outpace both mutual funds and ETFs for example. Part of what is responsible for that growth is lower exchange costs which make it possible to hold the underlying asset in an index that was previously untenable for anyone outside the ultra-wealthy. In order to fully realize the benefits of a direct indexing fund, directors will have to be like goldilocks of customization but not straying too far from the fundamental index. However, direct indexing is giving managers their best opportunity in years to take back the reins for clients and outperform ETFs and index platforms. Without a doubt tax loss harvesting is the best edge a director will have in customizing a direct index for their clients and it's the necessary part of how to stand out in the crowded space of custom indexing.


FINSUM: Investors should be in an open dialogue as to their clients preferences in diverging from the underlying index when customizing. The ship can steer quickly in the wrong direction.

Published in Wealth Management
Thursday, 18 November 2021 17:53

Morgan Stanley Gets a Boost from Direct Indexing

Morgan Stanley acquired custom indexing provider Parametric Portfolio associates in March and are benefiting greatly from the acquisition. Parametric has developed their existing client base by allowing them to pitch a new set of custom-built portfolios and increased AUM by 50% year over year. These custom indexing tools allow investors at Morgan Stanley to build tailored portfolios to meet ESG or tax objectives. On top of this, it furthers client relationships by allowing a more connected investment strategy and personal experience. Parametric is leading the industry in direct indexing by asset size.


FINSUM: Direct indexing will be an incredibly important tool in order to mitigate all of the tax changes in the new administration.

Published in Eq: Tech
Wednesday, 10 November 2021 22:48

Envestnet is Going Big on Direct Indexing

Envestnet’s CEO told investors that it oversees $49 billion in direct investing assets and that they see this number going higher in the future. Direct investing is a part of a growth area for the company along with other personalized portfolios, tax overlays, and ESG and impact investing. Direct indexing allows investors to hold the underlying assets and then add or drop stocks for offsetting tax purposes or to hit other financial objectives. Other giants in the financial industry such as Vanguard and Franklin Templeton have acquired direct indexing portfolios and many firms are ramping up competition in this space.


FINSUM: Direct investing makes a lot of sense over traditional hard indexing because of the customization and tailoring to your financial needs, but it does usually come at the cost of higher fees.

Published in Eq: Total Market
Thursday, 18 March 2021 17:20

ESG is Turning into a Cash Cow

(New York)

For many years ESG had been a fairly neglected asset class. Advisors and many retail investors thought that investing capital with moral considerations would hurt returns. Over the years many things have changed, including investors learning that ESG screens have actually led to outperformance in many cases and younger generations showing that they care a great deal more about these issues than their parents. Well, those stimuli have led to huge growth in the ESG space, and are leading to big revenue gains for asset managers. Fund providers are able to charge significantly higher fees for ESG-focused ETFs because of their moral importance to clients, and this has led to good fee revenue in an industry that is otherwise seeing contraction.


FINSUM: The key thing to remember here is that ESG funds don’t cost any more to run, so this is highly profitable for asset managers.

Published in Eq: Total Market
Thursday, 20 February 2020 10:31

Conservative Investors Pay the Highest Fees

(San Francisco)

It isn’t just Apple that is at risk from coronavirus. A lot of other tech companies are too, and it makes perfect sense. Apple is far from the only major US tech company that sources many of its parts from China and relies on the country for a significant portion of revenue. The other major companies which are highly exposed are Tesla (20% of its supply and demand comes from China), Dell, HP, and Corning (which looks especially vulnerable).


FINSUM: Corning has a major glass factory in Wuhan itself and relies on China for 25% of its revenue.

Published in Wealth Management
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